Local Firm’s Public Debut Boosts IPO Optimism

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After more than a year of inactivity, the IPO market in Los Angeles has finally shown signs of life.

After the initial public offering last week of PennyMac Mortgage Investment Trust, the Calabasas company started by former Countrywide executives to invest in distressed mortgages, analysts anticipate a notable increase in local public offerings in the coming months.

“We think that market is going to open up in the next year,” said Bryant Riley, chairman of West L.A. investment bank B. Riley & Co. LLC. “There are too many good companies out there that have had time to incubate over the last two years and haven’t been able to go public.”

Already, there are a number of L.A. IPOs in the pipeline.

Like PennyMac, two local companies Colony Financial Inc. in Century City and Western Asset Mortgage Capital Corp. in Pasadena are looking to take advantage of mortgage problems with upcoming IPOs. The filings are part of a new wave of companies seeking capital in order to invest in strained mortgage loans, analysts said.

“A lot of companies are looking at the distressed mortgage market and saying this is a great time to buy,” said Nick Einhorn, an analyst for Renaissance Capital, an IPO tracking firm in Greenwich, Conn. “There are about 15 other companies in the IPO pipeline looking at that.”

PennyMac, which raised $320 million with its July 29 IPO, buys pools of bad mortgages from the government or from failed banks and reworks them through modification programs.

The company, which fell short of the $400 million IPO target, has garnered widespread attention for its founder’s pedigree. Stanford Kurland, who started the company in 2008, was a top executive at Countrywide before the lender succumbed in the mortgage meltdown and was sold at a fire-sale price to Bank of America Corp.

Shares of PennyMac, which were priced at $20 in its IPO, fell 90 cents, or 4.5 percent, in its first full day of trading to close at $19.10. Indeed, the lukewarm reception of PennyMac’s stock suggests that some of the upcoming IPOs could face a bumpier road than some analysts believe.

Colony Financial, a subsidiary of Century City investment firm Colony Capital LLC, filed its prospectus June 30. The company said it plans to invest in commercial real estate debt. Colony Capital, founded by L.A. financier Tom Barrack, owns Neverland Ranch, the former home of Michael

Jackson.

Western Asset, which filed its prospectus June 12, plans to invest primarily in residential mortgage-backed securities.

Mortgage investment firms are not the only ones expected to go public, though.

Ed Wedbush, president of Wedbush Morgan Securities Inc., an investment bank in downtown Los Angeles, said he expects the filings to cover a range of industries, including life sciences and technology.

“I think it will be broad,” Wedbush said.

In addition to the PennyMac IPO, which was the first in Los Angeles since January 2008, Great American Group Inc., a liquidation firm in Woodland Hills, was expected to get approval last week to go public, though not through an IPO. The company was set to be acquired by a special-purpose acquisition company July 31.

The moves can be seen as a counterbalance to a long-standing trend of high-profile public companies leaving Los Angeles. In the past two years, the area has lost several of its largest companies, including Countrywide and IndyMac, which each fell victim to the mortgage meltdown. More recently, DaVita Inc., one of the few Fortune 500 companies in Los Angeles, announced that it was relocating to Denver.


New Offices

With increasing signs of stability in the financial services industry, some investment banks are seizing the opportunity to broaden their reach in Southern California.

Merrill Lynch & Co. Inc., which has reportedly been shedding jobs since it was acquired by Bank of America during the financial crisis late last year, announced last week the opening of a new office in Palos Verdes.

The outpost will provide a range of wealth management services, including retirement planning and investment advice. The office will be led by a team of advisers who joined Merrill Lynch in December.

Also, Wedbush Morgan Securities, headquartered in downtown Los Angeles, has opened a retail sales office in Santa Barbara, after recent office openings in cities such as Sacramento.


C-Suite News

CB Richard Ellis Investors, a real estate investment firm headquartered in downtown Los Angeles, said it has hired Matt Khourie as president. The board of Center Financial Corp., the Los Angeles holding company for Center Bank, voted to extend the contract of Chief Executive Jae Whan Yoo for another three-year period.


Staff reporter Richard Clough can be reached at [email protected] or at (323) 549-5225, ext. 251.